Survivor of the great dotcom crash: Q&A with Brent Hoberman

Brent Hoberman is remarkably busy. It took three months and a couple of million emails to peg him down for 20 minutes to answer a few questions. Then again, that probably comes with being a pioneer of the dotcom era.

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The late 90s were a turbulent time for the web: the burst of the dotcom bubble left many online companies in shambles, but there were survivors. One such survivor was Lastminute.com, the online travel and gift business Hoberman founded with Martha Lane-Fox in 1998. The publicly listed company was established to offer late holiday deals online. By 2000 it had more than 500 000 regular users and its offering had expanded to include not just travel but gifts and entertainment as well. In 2005 Hoberman stepped down as CEO following the acquisition of Lastminute.com by Sabre Holdings, owner of online travel company Travelocity, valuing Lastminute at £577-million.

The former Lastminute.com CEO is big on lifestyle ventures. His other company, mydeco.com is an online furniture and interior design site that provides 3D technology for consumers to design their own rooms online. These days Hoberman is focusing on ventures that look more at “collaborative consumption”, which means a service that allows people to share things they already own. He thinks of it as a high-end version of AirBNB, a service that allows people to rent out their homes to holidaymakers.

Hoberman believes there are great ecosystems in the tech world that could possibly compete with Silicon Valley, sprouting in places like China’s Chengdu, Russia’s Skolkovo and London’s Tech City. He also believes that the app economy is changing the nature of startups, citing successes such as Instagram where “small teams of 10-13 reaching tens of millions of people”.

Memeburn: Which emerging market region do you think has the most promising startup culture?Brent Hoberman: I guess Brazil. I was just recently there and there is definitely a buzz and an energy around the sector and an openness amongst the entrepreneurs — an America-style openness — and just an ecosystem that’s seeing tremendous growth on the back of the internet.

MB: What do you think makes a startup successful?BH: Going after a huge, addressable market — one where there are high margins and competitive dynamics that allow new entrance.

MB: Do you feel that technology destroys jobs?BH: No, I don’t think it destroys jobs. I think, however, that one needs to be careful. It increases productivity, which — if you look at it simplistically — means that in some areas, it will destroy jobs.

However, I think it gets you higher value jobs and (ideally) more profitable businesses, and that can go back to society. It also gets you a system whereby you’re able to have more entrepreneurs and it’s easier to start companies because of tech. So you can have a much greater amount of self-employed [people].

MB: Which areas are you currently investing in?BH: We’ve done a few in collaborative consumption, meaning where people share stuff they own, the high-end version of AirBNB, where people rent out their homes, where it gives you the proper curated hotel experience.

Otherwise, looking at mobile (like everyone), looking at apps, looking at online education. We’d like to do more in online health, but there aren’t the right deals yet. And obviously ecommerce, so companies like made.com which is a direct from manufacturer to consumer furniture and home-ware platform.

MB: Where do you think the next Silicon Valley will be?BH: I think Silicon Valley is a very unique place. People always raise the question as to where might there be great ecosystems in the tech world. I think that clearly we’re seeing some in some of the emerging markets that are pretty close — we’re seeing China and Russia both create domestic giants that are worth a lot, partly because they’re freezing out some of the obvious US players.

We’re seeing London — London actually is probably Europe’s leading capital to start a tech business and with the East London Tech City, especially after the Olympics, I think we’ll see more momentum in London. I think it has many advantages like with the time zone, culture, creative industries and financial industries.

MB: Silicon Roundabout in London is making waves right now — do you think it’s changed the London tech scene?BH: The London tech scene has changed primarily because what you have enough is big players in the first wave to do well, sell out, and reinvest in the next wave. So that’s been one of the biggest things. There are a whole host of others like that — who are now reinvesting in the next wave of technology startups. It’s very helpful for the ecosystem. Then you do have what the government is doing to feed startups in clusters in tech city and other places. It’s great. And then you have reform to EIS to startup investing tax relief, you’ve got entrepreneur visas, so you’ve got a lot of other good things that are happening to help the ecosystem.

MB: What inspired you to start an online gifting site like Lastminute.com?BH: It wasn’t really online gifting — that was one element of what we did. It was whether you planned on going out or staying in at the last-minute. That was the definition of what we were doing — it was to do with travel and leisure, and gifts was an element of it. Basically, what excites me about companies is ones where I can see myself as the consumer, and I can see there is a consumer need for the product. So clearly with Lastminute, it was very awkward (at the time) to do stuff at the last-minute. It was an inefficient market.

The same with when you were buying furniture. It was an inefficient market and the technology is going to be able to help us a lot. When we started in 2007, it wasn’t clear if people would buy furniture online at all really. People were very dismissive of that whole idea and now you see many players creating billion dollar businesses in the online furniture space.

MB: Do you think we’d heading for a credit-card free online shopping experience in the future?BH: That is a really good question. It’s sort of one of those things where it’s been amazing that it’s taken this long. Like location-based deals, right? Things that people talked about, that we did in 1999, and people replacing money. People talked about that for a long time too and it still hasn’t happened. The credit card companies have a very strong stranglehold.

But, absolutely, I think we’re seeing companies like PayPal and Square and several players in Europe — iSettle and others — who are going after this market, sometimes working with credit cards and sometimes not. And I think the big thing is going to be when we see the mobile phone companies break through. We’ve obviously seen that there is an impending mobile joint venture in Europe with three of the big four operators. Those sorts of consortia have to be able to pose a huge threat to credit cards in the end.

Equally, we’ve seen companies like Bitcoin from the other end, from the guerrilla side of things, able to make some really interesting plays. And you’ve got things like Facebook credits, which are creating their own payment ecosystem.

MB: What is the most interesting and original idea you’ve even been pitched as an investor?BH: It has to be something crazy… do you know the one I was accused of pitching a million years ago? Putting hotels on the moon. That would have to be crazy. Otherwise… we don’t get the meetings with the really crazy ones.

MB: Do you think it’s more important for a startup to have a tech leader or a business leader?BH: I think it’s changing slightly. It depends on the sector I think. In some areas, tech leaders definitely demonstrate that they’re more important and that they can do it without business advice. They can get to a huge scale in terms that it’s much easier to find business people. On the tech side of things, I think there is also the user interface — I’d change the question a bit. I’d probably back a user interface genius more than a tech genius.

MB: What are some of the mistakes you made when you started Lastminute that you wish you could change?BH: I think fewer smarter people is always a good mantra, but very hard to live by. So that would have been one. I think technology was – I’m not sure what mistakes we made, but we certainly made a lot – but it was very very expensive back then. It cost probably £25 million to build a website that would now cost maybe half a million. So a tremendous investment required in technology.

Lastly, I think many businesses that scale at the pace that we did (getting to a couple of billion dollars in revenue within a short space of time) I think back-end systems are [important]. You put your smartest people on the front end, whereas sometimes you need to put some of the really smart people on the back-end as well. I think that would have helped us. The same thing with GroupOn’s recent announcement about retaking profits. Again, it comes from the same sort of disease as chasing front end growth and neglecting the back-end.

MB: In the age of Kickstarter, do you feel that startups should try to make it on own their own before finding investors?BH: There is no rule. If you put a rule, there will be just as many people who are able to say “look, I did it the other way perfectly well” and I think that’s absolutely valid. But one thing that I still believe is that if you can raise a lot of money, particularly in a hard environment like there is today, you should. You minimise risk and become a smaller piece of something big.

That said, there are those that are able to fund their businesses from their customers and that’s fantastic when you can do it — [to] build at that scale, it’s fantastic. But it doesn’t happen as much that people are able to build huge businesses that way. Possibly, you can build small businesses that way.

MB: Do you think the ‘app economy’ is changing the nature of startups?BH: Yeah, certainly. What we’re seeing is the Instagrams of this world, where you can have small teams of 10-13 reaching tens of millions of people. That’s probably never happened before, right? I think the platform is just that much bigger now.

MB: Do you think we are in a social media bubble, like we had the dotcom bubble? BH: No, I think what we refer to as the dotcom bubble is one where every company was being valued as a winner, and I don’t think that’s happening now. I think what we are doing is getting some people winning very very quick, and still enough guys just believing that the growth curve is going to carry on for some time. It won’t.

That obviously won’t be right in every case, and there is going to be a number of success stories out there, but people are going to keep on to do that and invest like that for a while.

Photo Credit: Franchellin Vincent

http://twitter.com/electricwings Julian Noble

”
Equally, we’ve seen companies like Bitcoin from the other end, from the guerrilla side of things, able to make some really interesting plays.”

Bitcoin is not a company – and there is no company that is ‘like Bitcoin’.
Hoberman is correct that it is somewhat ‘guerrilla’ – but it looks like he doesn’t understand the half of it!